Dollar Exchange Rate near Flat Ahead of Fed Decisions
Policymakers will most likely implement their first-rate cut in over a decade. This follows concerns on slowing economic growth and subdued inflation.
Lately, the Central Bank has faced a string of criticism from President Trump over its decision to increase rates. The ongoing reduction of the central bank’s balance sheet has also drawn criticism from the President. Trump cites that the measures are responsible for the slowed growth.
The U.S. dollar index that tracks the performance of the currency against a basket of other major currencies was little changed at 97.722 by 11.35 AM ET.
The dollar was near two-month highs this past week. This followed data showing that the GDP grew by an annualized rate of 2.1% in the second quarter of 2019. The GDP growth figure was lower than the first quarter’s 3.1% but still stronger than forecasts. Economists had predicted quarterly growth of 1.8%.
Later this week, the U.S. jobs report for July will become available. Analysts expect a drop in the number of jobs added to the economy to 160,000 jobs, down from last month’s 224,000. Despite this, the unemployment rate will likely decline by 3.6%
The GBP/USD currency pair dropped by 0.1% to 1.2370. The recent drop of the pound means that it has fallen by up to 5% since May. Primarily because of fears of a no-deal Brexit.
The Bank of England will hold a meeting on Thursday and deliberate on maintaining the interest rates.
The USD/JPY pair fell 0.1% as the Bank of Japan looks to keeping the interest rates unchanged when it meets on Tuesday. The Governor of the Bank of Japan will likely give a briefing after the meeting on Tuesday.
In other developments, the USD/CNY pair climbed 0.2% to 6.6911. This is after reports revealed that officials from Washington and Beijing are expected to meet for trade talks which will happen for two days. However, neither side is overly optimistic about a breakthrough. From the Chinese front, Vice Premier Liu He will lead the talks.
The talks will be the first after a truce was reached between President Trump and his Chinese counterpart, Xi Jinping on the sidelines of the G-20 held in Osaka, last month.
According to Robin Xing, chief China economist at Morgan Stanley, there still exists a considerable gap between the two largest world economies. This will likely cause a breakdown in talks as they disagree on key sticking points. So far, there is no clear way towards an amicable deal for both nations.
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